The Central Bank of Nigeria (CBN) on Thursday re-stated its commitment to establish special court to hear cases on loan default in microfinance banks.
Mr Olufemi Fabanwo, the Director of Other Financial Institutions Department in CBN, disclosed this in an interviews with newsmen in Lagos.
The director was in Lagos to attend a meeting of the Committee of Microfinance Bank Directors in Nigeria.
He said that the apex bank had constituted a committee that would look into modalities of establishing the court.
According to him, the court is vital to survival of the sub-sector.
Fabanwo said that the nature of service rendered by the sub-sector did not permit it to accommodate bad debts as it would distort its buoyancy and force operators out of business.
He said the apex bank had held in-depth discussions on the issue with the Ministry of Justice so that the court could be effective when established.
The CBN director advised the directors of microfinance banks to ensure that loans were given out to only the active poor.
According to him, this is the target group that need the loans from microfinance banks to trade.
He said that the reason for his advice was to make their loans recoverable easily.
``Beyond this, microfinance banks are to guide against too much investment in fixed assets, flamboyant office structures and exotic cars as the nature of micro financing does not permit this,’’ he said.
Speaking at the meeting, Mr Olufemi Babajide, the Chairman of Lagos Chapter of National Association of Microfinance Banks, said that loan defaulters in microfinance banks were enjoying "reprieves".
He said that the apex bank was now ready to establish the special court, ``one year after it made the pronouncement’’.
He said that the delay in establishing the court had raised concern among operators of micro-finance banks as the delay was negatively affecting their activities.
``Some loans that would have been recovered, if the special court had been established, are already going bad.
``The sub-sector needs the special court as quickly as possible,” he said.